AIG announced on 19 October that it has written its first Sharia-compliant warranty and indemnity (W&I) policy out of London’s M&A market. AIG developed the policy in conjunction with Cobalt Underwriting, a Sharia-compliant managing general agent, which HFW were involved in establishing (as reported here: http://www.hfw.com/HFW-advises-Capita-on-Cobalt-investment-May-2013).
Islamic finance is one area which the UK is seeking to develop ahead of Brexit, and AIG’s first W&I policy follows recent moves by the UK and the insurance market as a whole to target Islamic financial services. Back in 2013, the then-Prime Minister David Cameron confirmed at the World Islamic Economic Forum that the UK would seek to establish London as a global Islamic finance centre, and a recent report found that Britain is now the leading Western centre for Islamic finance.
Although (re)insurance was the last financial services sector to offer Sharia-compliant products, it seems that the industry is making attempts to catch up. Lloyd’s was a founding member of the Islamic Insurance Association of London when it was launched in 2015, and Cobalt has received approval in principle for a new Lloyd’s syndicate.
It remains to be seen how Brexit will affect the UK (re)insurance market, but steps are clearly being taken to open up the market to a new source of income, which is a potentially profitable one – reports consider the global Islamic insurance market to be worth tens of trillions of US dollars.